Published 8:00 pm, Monday, February 11, 2002

Bristol-Myers, which has already written off $735 million from the deal, responded that it was considering "business and legal options," but for better or worse, may be stuck with the deal, analysts say.

New York City-based ImClone has been plagued by a plummeting stock price, investor lawsuits and three federal investigations since the Food and Drug Administration refused on Dec. 28 to even review its application to sell a cancer drug it hoped would provide blockbuster sales.

Bristol, which failed to discover the shortcomings in ImClone's application for Erbitux before striking the deal in September, demanded last week that its much smaller biotech partner forgo $800 million in future payments. Bristol also wants up to 75 percent of Erbitux's profits _ if the drug is ever approved.

Bristol insisted that it take the lead in shepherding the drug through the FDA process, and called on ImClone's chief executive Samuel Waksal and chief operating officer Harlan Waksal to step down until Erbitux is approved.

The Waksal brothers said in December that their application simply lacked documentation of certain results. Each expressed optimism that the drug could be approved as early as this year.

Since then, analysts have said that the FDA's concerns are more complex and that an additional clinical trial will probably be needed, delaying approval until at least late next year.

Nonetheless, ImClone's loyal board of directors rejected all of Bristol's demands on Tuesday, saying it wouldn't be in the best interest of ImClone shareholders to renegotiate the deal.

A letter ImClone's chairman Robert Goldhammer wrote to Bristol chairman and chief executive Peter Dolan added that ImClone looks forward to working with Bristol under the terms of the old agreement _ an entreaty Bristol apparently will resist.

"We are extremely disappointed with your response to our proposal," Bristol CEO Peter Dolan responded Tuesday in a letter to ImClone. "Clearly, we have a fundamentally different view of the serious issues" raised by the FDA, "including who should lead the effort going forward."

ImClone plans to meet with FDA officials on Feb. 26 to discuss the Erbitux application. Dolan said Bristol executives plan to attend and help ImClone prepare for that meeting.

"I must consider the best interests of Bristol-Myers Squibb Company and its shareholders," Dolan said in his letter to ImClone. "Accordingly, we are considering our business and legal options with respect to our relationship with ImClone but will wait until after the FDA meeting to determine what further actions we may take."

Analysts said Bristol appears to have little legal recourse, unless it can prove ImClone officials purposely lied or withheld vital information during negotiations.

"There's nothing to suggest that ImClone did that," said Patrick Mooney, an analyst with Thomas Weisel Partners. "Bristol walked in with eyes wide open."

Analysts also doubt Bristol will walk away from the deal.

"The damage is already done. Bristol won't look any better," said Bristol shareholder John Schroer, president of Itros Capital, a Denver-based money management firm specializing in health care. "What happens if Bristol walks away and the drug is successful and ImClone sells it to another pharmaceutical company for $1 billion?"

Most analysts foresee the two companies compromising and suggest ImClone should allow Bristol to take control of the regulatory process.

"The Waksals have probably lost all credibility with the FDA," Mooney said.

Bristol, with key drugs coming off patent and an unimpressive development pipeline, stunned the pharmaceutical industry late last year by spending $1 billion to purchase 19.9 percent of ImClone and paying the company an additional $200 million signing bonus.

The deal calls for Bristol to pay ImClone $800 million more when certain developmental milestones are met, including FDA approval to sell Erbitux. Bristol is to receive 61 percent of Erbitux's net sales, which analysts said amounts to about 40 percent of profits.

Since signing the agreement in September, ImClone's stock price has plummeted nearly 70 percent and Bristol has written off $735 million of its ImClone investment.

Bristol's stock closed up 21 cents to $45.38 a share on the New York Stock Exchange. ImClone shares were up 82 cents to $17.65 on the Nasdaq Stock Market.